Asian stocks and the dollar were relatively stable on Tuesday as investors awaited a U.S. inflation report that could impact the Federal Reserve’s rates outlook and the timing of interest rate cuts. Meanwhile, Bitcoin remained strong, surpassing $50,000 for the first time in over two years. MSCI’s broadest index of Asia-Pacific shares outside Japan rose slightly, while Japan’s Nikkei continued its upward trend, reaching a fresh 34-year high. China’s financial markets were closed for the Lunar New Year holiday. Wall Street provided cues for trading in Asia, with the Nasdaq slipping and the S&P 500 closing lower. This week, market focus will be on crucial reports on January’s U.S. Consumer Price Index (CPI) and Producer Price Index. Traders have scaled back expectations of early and deep interest rate cuts from the Fed due to recent positive data on the U.S. economy. Economists expect CPI to rise 2.9% year-on-year, with a potential upside surprise leading to higher yields and a stronger dollar. The Japanese yen is also sensitive to U.S. rates and remains near the closely-watched 150 per dollar level. In commodities, U.S. crude rose slightly to $76.94 per barrel.
Hot Take: Market Volatility Expected Ahead of U.S. Inflation Report
The upcoming U.S. inflation report is anticipated to have a significant impact on market volatility as it shapes the Federal Reserve’s rates outlook and influences investors’ expectations for interest rate cuts. Analysts are closely watching the Consumer Price Index (CPI) and Producer Price Index (PPI) data for January, with economists predicting a slowdown in inflation compared to previous months. However, there is a risk of an upside surprise that could lead to higher yields and a stronger dollar.
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